M/s. Endravour Industries Ltd., Hyderabad V. DCIT, Circle-2(2), Hyderabad

ITA 1653/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59108 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 19-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D D GOYAL
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Depreciation; Opportunity of being heard; Set aside
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.1653/HYD/2010 ASSESSMENT YEAR: 2007-08 M/S. ENDEAVOUR INDUSTRIES, VS. DCIT , CIR- 2(2), HYDERABAD. HYDERABAD. (PAN:AAACE 8007 E) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P. MURALI MOHAN RAO RESPONDENT BY: SHRI D.D. GOYAL DATE OF HEARING : 14-12-2011 DATE OF PRONOUNCEMENT : -01-2012 ORDER PER CHANDRA POOJARI, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 30-08-2011 OF THE CIT (A)-III, HYDERABA D AND IT PERTAINS TO THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE RAISED THE FOLLOWING CONCISE GROUND S BEFORE US:- 1. THE CIT (A)-III ERRED WHILE PASSING THE ORDER WHEREIN ADDITIONS/DISALLOWANCES MADE BY THE ASSESSING OFFICER HAS BEEN CONFIRMED WHICH IS NOT CORRECT AND NOT JUSTIFIED IN FACTS AND IN LAW AND BOTH. 2. THE ORDER U/S 144 HAS BEEN PASSED BY THE ASSESSING OFFICER AND THE REASONABLE OPPORTUNITY HAS NOT BEEN GIVEN TO THE ASSESSEE AND HENCE IT IS NOT JUSTIFIED AND BAD IN LAW. ITA NO.1653/H/2011 M/S.ENDEAVOUR INDUSTRIES LTD., HYD. =============================== 2 3. AS PER THAT THE CIT (A) ERRED WHILE NOT GIVING O F OPPORTUNITY TO THE ASSESSEE FOR SUBMISSION OF INFORMATION AND SECOND TIME CALLED FOR REMAND REPORT. 4. THE CIT (A) ERRED WHILE PASSING THE ORDER WHEREIN THE REMAND REPORT REPLY SUBMITTED BY THE ASSESSING OFFICER HAS NOT BEEN CONSIDERED AT ALL AND CALLING OF THE REMAND REPORT BY THE ASSESSING SECOND TIME IS NOT LEGALLY CORRECT AS ALREADY THE REMAND REPORT REPLIES WERE AVAILABLE WITH THE CIT (A) FOR THE ABOVE ASSESSMENT YEAR WHICH SHOULD HAVE BEEN CONSIDERED. 5. INDUCTION OF SHARE CAPITAL OF RS.1,04,70,000: THE CIT (A) ERRED WHILE CONFIRMING THE ADDITIONS OF RS.104.70 LACS WHICH IS NOT JUSTIFIED AND BAD IN LAW AS THE CONFIRMATION LETTER FROM THE CONCERNED PERSONS HAD ALREADY BEEN SUBMITTED WHICH HAS NOT BEEN CONSIDERED WHICH IS NOT CORRECT AND NOT JUSTIFIED AND BAD IN LAW. 6. THE DISALLOWANCES OF DEPRECIATION OF RS.88,25,947 NOT JUSTIFIED AND BAD IN LAW. 7. THE CIT (A) ERRED WHILE DISALLOWING THE INVESTMENT IN BANK FIXED DEPOSITS OF RS.222.10 CRORES MADE BY THE ASSESSING OFFICER HAS BEEN CONFIRMED WHICH IS NOT JUSTIFIED AND BAD IN LAW WHICH HAS ALREADY BEEN CLARIFIED/EXPLAINED BY THE ASSESSEE COMPANY. 8. ADDITION TOWARDS THE SUPPRESSION OF THE PROFIT OF RS.25.00 LACS WHICH IS NOT CORRECT AND NOT JUSTIFIED. ITA NO.1653/H/2011 M/S.ENDEAVOUR INDUSTRIES LTD., HYD. =============================== 3 9. THE ENHANCEMENT OF THE AMOUNT OF RS.14,94,82,890/- ON ACCOUNT OF DIFFERENCE BETWEEN THE RECEIPT OF FUNDS FROM CARGILL, SINGAPORE AND THE DEPOSITS MADE IN THE SBI BANK OVERSEAS BRANCH NEW DELHI 3. THE FIRST GROUND IS GENERAL IN NATURE AND NO ADJUDICATION IS REQUIRED. 4. SECOND GROUND IS WITH REGARD TO THE PASSING OF T HE EX PARTE ORDER BY THE ASSESSING OFFICER U/S 144 OF THE INCOME- TAX ACT WHICH IS NOT EMANATED FROM THE ORDER OF THE CIT (A) AND HENCE IT IS DISMISSED AS SUCH. 5. THE 3 RD AND 4 TH GROUNDS ARE WITH REGARD TO NON- PROVIDING ADEQUATE OPPORTUNITY TO THE ASSESSEE BEFO RE THE ASSESSING OFFICER AS WELL AS CIT (A). THESE GROUN DS HAVE BECOME INFRUCTUOUS IN VIEW OF OUR FINDINGS GIVEN EL SEWHERE IN THIS ORDER AS WE HAVE SET ASIDE VARIOUS RELATED ISSUES INVOLVED IN THIS APPEAL TO THE FILE OF THE ASSESSIN G OFFICER FOR FRESH CONSIDERATION. 6. THE NEXT GROUND IS WITH REGARD TO THE ADDITION O N ACCOUNT OF SHARE CAPITAL. THERE WAS AN ADDITION OF RS.1,04,70,000/- TOWARDS SHARE CAPITAL. THE SHARE CAPITAL SAID TO HAVE BEEN RECEIVED FROM THE FOLLOWING PARTI ES:- 1. GVNS RAJU RS. 1,75,000/- 2. AB SATYAVAS REDDY RS. 3,000/- 3. PV RAMANA REDDY RS. 10,000/- 4. KPC RAO RS. 10,500/- 5. LUMBINI ELECTRICALS LTD. RS. 90,00 0/- ITA NO.1653/H/2011 M/S.ENDEAVOUR INDUSTRIES LTD., HYD. =============================== 4 6. MS MURTHY RS 5,10,000/- 7. P. ANJANEYULU RS. 50,70,000/- ACCORDING TO THE ASSESSEE, IT FILED FULL DETAILS OF THESE PARTIES AND CONFIRMATION LETTERS. THE CIT (A) CONFIRMED THE ADDITION ON THE REASON THAT THE EVIDENCE BROUGHT ON RECORD I S NOT ENOUGH TO HOLD THAT THE SHARE CAPITAL HAS BEEN EXPL AINED. BEFORE US, THE LEARNED AUTHORISED REPRESENTATIVE FO R HE ASSESSEE PLEADED THAT THE EARLIER IMPUGNED ASSESSME NT ORDER IS AN EX PARTE ORDER AND HE PRAYED FOR ONE MO RE OPPORTUNITY TO BE AFFORDED BEFORE THE LOWER AUTHORI TIES TO EXPLAIN THESE INVESTMENTS. IN THE CIRCUMSTANCES, W E ACCEDE TO THE REQUEST OF THE ASSESSEES COUNSEL AND ACCORD INGLY WE SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING O FFICER WITH A DIRECTION TO TO THE ASSESSEE PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION BY FILING NECESSARY INFORMATION FROM THE INVESTORS TO THE SATISFACTION OF THE ASSESSING OFFICER. 7. NEXT GROUND IS WITH REGARD TO THE DISALLOWANCE O F DEPRECIATION IN COMPUTERS ON THE ADDITION OF RS.1.4 6 CRORES. THE ASSESSEE CLAIMED DEPRECIATION ON COMPUTERS AT RS.88,25,947/-. THE ASSESSEE HEREIN HAS NOT PRODU CED NECESSARY EVIDENCE TO SUPPORT THE CLAIM OF DEPRECIA TION ON RS.1.46 CRORES BEFORE THE LOWER AUTHORITIES. THE AS SESSEE IS REQUIRED TO FILE COPIES OF INVOICES/ PURCHASE BILLS OF COMPUTERS AND TO PROVE THAT THESE COMPUTERS HAVE BE EN PUT TO USE FOR THE PURPOSE OF BUSINESS. ACCORDING LY, IN THE INTEREST OF JUSTICE, WE DIRECT THE ASSESSING OFFICE R TO GIVE AN OPPORTUNITY TO THE ASSESSEE TO PROVE ITS CASE BY PR ODUCING VALID BILLS AND USAGE OF SAID COMPUTERS IN ITS BUSI NESS. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER IS DIRECTE D TO VERIFY ITA NO.1653/H/2011 M/S.ENDEAVOUR INDUSTRIES LTD., HYD. =============================== 5 ALL PURCHASE BILLS AND USING OF COMPUTERS IN ASSESS EES BUSINESS AND DECIDE THE ISSUE IN ACCORDANCE WITH LA W. 8. THE NEXT GROUND IS WITH REGARD TO THE ADDI TION OF RS.221.10 CRORES BEING FIXED DEPOSITS MADE BY THE A SSESSEE. ACCORDING TO THE ASSESSEE 237.04 CRORES RECEIVED FR OM M/S. CARGILL INTERNATIONAL TRADING PVT. LIMITED, SINGAPO RE THROUGH STATE BANK OF INDIA, OVERSEAS BRANCH, JAWAH AR VYAPAR BHAVAN, NEW DELHI. ACCORDING TO THE LEARNED AUTHORISED REPRESENTATIVE, THE ASSESSEE HAS NOT BE EN GIVEN PROPER OPPORTUNITY TO EXPLAIN THE SAME BEFORE THE C IT (A) WHEN HE CALLED FOR THE REMAND REPORT SECOND TIME FR OM THE ASSESSING OFFICER AND PLEADED AN OPPORTUNITY OF BEI NG HEARD TO THE ASSESSEE TO EXPLAIN THE SAME BEFORE THE AUTH ORITIES. WE ACCEDE TO THE REQUEST OF THE ASSESSEE AND REMIT THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION TO DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER AFFORDING AN OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE. 9. THE NEXT GROUND IS WITH REGARD TO THE ADD ITION ON ACCOUNT OF NET PROFIT. THE ASSESSING OFFICER MADE AN ADDITION TOWARDS NET PROFIT ON THE GROUND THAT THER E WAS LOWER RATE OF NET PROFIT COMPARED TO THE PRECEDIN G YEAR. IN THE IMMEDIATELY PRECEDING YEAR ON A TURNOVER OF RS. 103.61 CRORES, THE NET INCOME ADMITTED WAS RS.63.19LAKHS A ND THE TURNOVER FOR THE PRESENT ASSESSMENT YEAR WAS 198.82 CRORES WITH THE NET INCOME OF RS.69.97 LAKHS AND THIS WAS APPLIED BY ADMITTING THE RATE OF NET PROFIT OF THE PRECEDIN G YEAR TO THE CURRENT YEARS TURNOVER WHICH WORKS OUT TO RS.1 21.18 LAKHS. WE FIND THAT THIS ADDITION IS MADE ON AD HOC BASIS. IN THE CIRCUMSTANCES, WE DIRECT THE ASSESSING OFFIC ER TO ITA NO.1653/H/2011 M/S.ENDEAVOUR INDUSTRIES LTD., HYD. =============================== 6 COMPLETE THE ASSESSMENT AFTER EXAMINING THE BOOKS O F ACCOUNTS OF THE ASSESSEE AND THE DISALLOWANCE IF AN Y TO BE MADE, THAT IS TO BE SPECIFIC AND NOT ON AD HOC BASI S. 10. THE ASSESSEE ALSO RAISED A GROUND WITH REGARD TO ENHANCEMENT OF THE AMOUNT OF RS.14,94,82,890/- ON ACCOUNT OF DIFFERENCE BETWEEN THE RECEIPT OF FUNDS FROM CARGILL, SINGAPORE AND THE DEPOSITS MADE IN THE SBI , OVERSEAS BRANCH, NEW DELHI. SINCE WE HAVE SET ASI DE RELATED ISSUE RAISED IN THIS APPEAL TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION IN ACCORDANCE WITH LAW, THIS ISSUE ALSO SHOULD GO BACK TO THE FILE OF THE ASSESS ING OFFICER FOR FRESH CONSIDERATION IN ACCORDANCE WITH LAW. 11. FURTHER, WE DIRECT THE ASSESSEE TO CO-OPERATE W ITH THE ASSESSING OFFICER BY FURNISHING NECESSARY EVIDENCE AND INFORMATION. IN CASE, THE ASSESSEE IS NOT CO-OPERAT IVE AS IN EARLIER OCCASION, THE ASSESSING OFFICER IS AT LIBER TY TO DRAW AN ADVERSE INFERENCE AND DECIDE THE ISSUE IN ACCORD ANCE WITH LAW. IT IS NEEDLESS TO SAY THAT THE ASSESSING OFFICER HAS TO DECIDE THIS ISSUE ON PRIORITY BASIS AS THIS IS H IGH DEMAND CASE. 12. IN THE RESULT, THE APPEAL FILED BY TH E ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 12-01- 2012. SD/- (ASHA VIJAYA RAGHAVAN) SD/- (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 12TH JANUARY, 2012. ITA NO.1653/H/2011 M/S.ENDEAVOUR INDUSTRIES LTD., HYD. =============================== 7 COPY FORWARDED TO: 1. C/O P. MURALI & CO.,CAS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD. 2. DCIT, CIR-2(2), HYDERABAD. 3. CIT CONCERNED, HYDERABAD. 4. THE CIT(A)-III, HYDERABAD. 5. THE DR, ITAT, HYDERABAD JMR*